Santa Barbara Finance Director Bob Samario says the city knows it’s in for a bumpy ride with its General Fund, fueled in part by the lingering recession, declining tax revenue, and a big jump in salary and benefit costs over the last decade. (Lara Cooper / Noozhawk file photo)

[Noozhawk’s note: This is one in a series of articles on Noozhawk’s Santa Barbara Challenge, our public-engagement project on the city of Santa Barbara’s budget. Related links are below.]

Santa Barbara’s General Fund is at the epicenter of budget workshop discussions, since it makes up less than half the city’s budget but hosts almost all the deficits.

Economic downturns hit the General Fund hardest because it fuels the traditional government services that depend on tax revenues for income. Combined with ever-increasing expenses, the city of Santa Barbara has struggled with making multimillion-dollar spending cuts for the past several years.

The Last 10 Years: Rising Expenses Overtake Revenue Increases

The General Fund hosts the public safety, community development, parks and recreation, library, public works and administrative departments.

Tax revenues are the biggest source of income for governmental funds and all local taxes have lost years of growth as a result of the recession.

Monies have taken a nosedive since 2008, and because the city can’t easily raise tax rates, it’s forced to close the gap with spending reductions.

However, 75 percent of the General Fund’s monies are spent on salary and benefit costs, which are increasing every year even with labor concessions and eliminating positions through attrition.

Since 2000, the General Fund’s expenses have increased to $99.6 million for the 2010 budget from $63.9 million. Expenditures came in above revenue levels in 2004, 2005, 2007, 2008 and 2009, according to city documents.

The increased costs are related mostly to salary and benefit expenses, which have jumped up about $25 million — or about 68 percent — since 2000.

“For the last five years, we haven’t done a good enough job to keep costs down,” said Bob Samario, the city’s finance director.

Today: The Annual Multimillion-Dollar Problem

Raising revenues and cutting expenses is the practiced method to solve a deficit, but when revenues are tax-based and therefore less flexible, the options become one-sided: magically find money, or cut, cut, cut.

Staff members try to fashion solutions that limit significant cuts to service, such as leaving positions vacant, using reserves and negotiating labor concessions. These one-time fixes have been used extensively in the last two fiscal years, which each had a $10 million funding gap.

Concessions must be renegotiated every year for most labor groups and are one-time fixes. So far, voluntary concessions have included furloughs, or unpaid leave, postponing raises and suspending vacation cash-outs.

There have not been any layoffs yet, but about 80 positions have been lost through attrition and vacancies in the last few years, Samario said.

This year, banking on future labor concessions was the City Council’s last-ditch attempt at saving city services, such as the Police Department’s sobering center, park restroom maintenance, library collections and the Santa Barbara Channels public-access TV. The potential concessions were not negotiated by the time of budget adoption, and were not considered to be placed back into budget reserves.

A 25-percent reserve level represents three months of revenues, for unprecedented situations in which the city gets no revenues but still accrues expenses, Samario said. It breaks down into 15 percent for disaster reserves, 10 percent for budgetary reserves and a straight $1 million in capital reserves, which has never been touched.

The disaster reserves are designated for major natural disaster situations, and have never been needed, but the budgetary reserves have been nearly depleted. The City Council has voted to use most of the recommended $10 million, leaving reserves with $18.2 million of the recommended $25 million.

Those reserves are meant to be used in economically uncertain times, but the city has used them more than it should have, Samario acknowledged.

“In reality, we probably used them for more than fluctuations ... we used them to fund ongoing costs,” he said.

The Long-Term Picture:

Getting revenues and expenses to match up again is an uphill battle, likely with many painful proposals on their way.

The economy’s recovery will likely be slow, and tax revenues have lost years of growth. Samario mentioned the “bathtub” shape some believe the recovery will take — once in, it takes a long time to get out, and the possibility of a “double-dip” recession. Sales tax revenues, for one, have been “worse than we ever thought they could be,” he said.

— Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk or @NoozhawkNews. Become a fan of Noozhawk on Facebook.

This is just the beginning.. Wait until the RDA funds are gone, which will happen at the latest in 2015.
It is crazy to promise future year pay and benefit increases when there is no certainty that revenue will increase.
The city budgeting is at about par with individuals that signed up for sub-prime loans.

» silentnomore on 04.19.11 @ 11:11 AM

Of that 75% over 3/4 of it goes to Police & Fire. Not the Libraries, Not Public Works, Not Parks & Rec & Not Administrative Departments.Yet, we keep cutting those services. Doesn’t make a lot of sense to me.

» Really? on 04.19.11 @ 12:02 PM

The elephant in the room is property values.

Just look around at the number of homes and businesses for sale. Then investigate the number of defaults in the area. If you have an insider (banking S&L) find out how many of these are being held off the market by institutions. It is significant. Owners faced with negative values or long term gains and in need are now coming on the market with the small stabilization.

As these values fall in regard to tax revenues, the City of SB will continue to see long term red ink.

Raytheon, UCSB, have all laid off and down sized, with the University facing even more.

Watching entrenched big government interests continue to scheme for more City programs, and socialized housing the ugly truth is government has far outstripped low and middle income sectors ability to pay. It has reached that point where the lower reaches of the wealthy cannot stand it. Remember that when you want another government owned apartment, specialized state health program, or civil service pension increase.

» John Locke on 04.19.11 @ 01:08 PM

Since you bring up property values, how many folks do you think have inherited and are living in Mommy’s house at Mommy’s tax basis? How many beneficiaries of Prop 13 are paying taxes 1/10 of what their neighbors pay? How many businesses, thanks to loopholes in the tax laws, have traded up and still pay old tax rates? Prop 13 had good intentions but was distorted into a welfare plan for a certain privileged set of folks at the expense of the rest of us and at the expense of education. Time to fix it. Go back to the original intent (protecting the elderly against losing their homes to the greedy Legislature’s insatiable appetite for ever-increasing taxes) and also realize that 30 years of the old Prop 13 has created enormous distortions in tax burden on individuals.

» Really? on 04.19.11 @ 02:31 PM

To JL’s comment. As with so many issues Prop. 13 is not the problem it is a voter base and legislature that wanted more and more with the indirect costs of TAXATION. The intent of the voters with 13 was to choke off what has become the head long rush to Socialization of the State of California.

These same types did an end run by calling taxes fees (yet by any other name).

I know of at least 35 nice apartment rentals under this provision. All are rented below the market rate. With your call for re-evaluation and killing of Prop. 13 the rents would go up a minimum of $400.00 per month. Tell that to the residents who average 5-8 years per unit. All the time saving for a condo or home of their own.

Nope, the problem is big government and greedy voters.

» lou segal on 04.22.11 @ 12:48 PM

It is nice to see our Finance Director, Bob Samario, speak candidly about the city’s unwillingness to restrain spending. No getting around it, it’s time to renegotiate employees’ salaries and retirement benefits. These reductions cannot be one time fixes; they must be long-term fundamental changes that really curtail govt spending.

» John Locke on 04.22.11 @ 01:33 PM

@Really: I agree with your comment re big government and greedy voters, but 35 apartments are nothing compared to the overall distortions. Subsidized rentals are not incompatible with revising (that’s REVISING, not eliminating) Prop 13 (hey, I benefit from 13, too, but when my neighbor pays 10% the tax of the guy next door that’s a sign of a serious problem). Pick any two comparable houses in SB and look up their taxes (it’s public record and online) - you’ll be amazed at the inequities.

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